More common sense than anything, but here is a FRB Staff Opinion on the subject:
"EXTENSION OF CREDIT"--Loan to Children Guaranteed by Officer
Loans to the children of an executive officer of a bank, in an amount greater than the lending limitations of Regulation O, that are guaranteed by that executive officer are extensions of credit to the executive officer in violation of Regulation O. This conclusion would not be altered if the executive officer were to place securities with a value greater than the amount of the loans into a trust to be used to secure the loans and if those securities were to revert to the executive officer on repayment of loans and the executive officer were to retain voting control and beneficial ownership of the shares. The pledged securities remain under the control of the executive officer, and the trust agreement constitutes a guaranty of the loan by the executive officer and is therefore still an extension of credit under section 215.3(a)(8) of Regulation O. STAFF OP. of March 9, 1981.
Authority: 12 CFR 215.3(a)(8) and 215.5.
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